Is seller financing really happening?

Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes

Hello,

Looking to hear from owner's that have done a seller financed deal or knows of someone that did and what was the outcome, good or bad?

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Dan Duenas

Lender · Member since 2026 · 36 posts · 20 votes

It happens — and when it goes bad it's almost always the same story: a 3- or 5-year balloon with no exit plan lined up, and the bank says no when the balloon comes due.

The deals that work tend to share three things: the seller owns it free and clear (or close), the note is recorded properly with a real servicer collecting payments, and the buyer walks in already knowing their takeout — a DSCR refi, a sale, whatever — before the balloon date.

The deals that blow up: handshake terms, no servicing (he-said/she-said on what's been paid), insurance and taxes left to chance, or a balloon the buyer has no realistic way to pay. If a seller-financed deal can't appraise or can't qualify for bank financing, that's often WHY the seller is offering terms — price it and structure it with that in mind.

Happy to run the takeout numbers on any seller-financed deal you're looking at — especially if there's a balloon in it. — Dan

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Naum Raz
Investor · Brooklyn, NY · Member since 2016 · 56 posts · 40 votes
2w
It happens more often than people think but still not very common. Usually, it happens with sellers that don't need money upfront.

Also, it happens with many sophisticated sellers that understand what and how seller financing works.
2 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  1w
  Naum,
  Definitely is a lot easier to negotiate with a seasoned owner than a owner that has owned for a short time.
  0 Reply
Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
2w
@Dennis Bamford
-yes
-good
1 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  1w
  AWESOME!
  0 Reply
Alex Rodgers
Investor · Los Angeles, CA · Member since 2023 · 12 posts · 17 votes
2w
I haven't sold a property on seller finance but my latest purchase was a triplex in Clarksville Tennessee that I bought on seller finance.
The previous owner was a flipper who had bought the property and fixed it up but with a combination of poor market timing and misjudging the demand in the area, overpriced the property and couldn't sell it for over 9 months. Finally, the seller put in the MLS description that they would be open seller financing.
Things I was able to negotiate:
- 10% down, 4.5% interest rate, 7 year balloon
Things the seller was able to negotiate:
- No inspection, I have to take the property as-is, sight unseen.
- Ability to take the property back if payments are 30+ days late.
- I had to pay lawyers fees to draw up the contract.
Finding these deals is not too difficult. You can search on Zillow or Redfin for Owner Financing/Seller Financing, etc. You can also join Facebook groups for people offering properties on seller finance.
3 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  1w
  Alex,
  You already have a team in TN. to take on the property management and rehab?
  1 Reply
- Alex Rodgers
  Investor · Los Angeles, CA · Member since 2023 · 12 posts · 17 votes
  1w
  I have a team now, I didn't when I was acquiring the deal. I more or less came upon it by accident. Luckily, the property was recently flipped, and two out of the three units were occupied so I was not too concerned about rehab but I wouldn't have been afraid of finding a general contractor if the deal was right. If I could go back, I would have the property management and general contractor in place before trying to find a property but sometimes you can't expect these things.
  0 Reply
- Jaron WallingPro Member
  Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
  1w
  Alex, was the seller free and clear on the property before you negotiated the seller financing contract? It seems like most seller finance deals come from A; experienced investors collecting a fat DP upfront to protect them self's (you put down 10% but that 4.5% is nice!), and strong clauses to take the property back if the buyer can't perform out at balloon time, B; older investors holding debt free RE looking to slowly sell which spreads out the capital gains tax over multiple years, or C; combination of A+B.
  
  I don't see other reasons to entertain the strategy.
  2 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  1w
  @Jaron Walling we come across all kinds of situations where a owner is willing to do seller finance:
  -Passive income without managing the property
  -Their spouse passed away and they need the income
  -Capital Gains Tax (you already stated)
  -The property may not be able to pass a bank appraisal
  -May get a premium selling price
  2 Reply
- John Leland
  Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 137 posts · 43 votes
  1w
  Quote from @Alex Rodgers:
  I haven't sold a property on seller finance but my latest purchase was a triplex in Clarksville Tennessee that I bought on seller finance.
  The previous owner was a flipper who had bought the property and fixed it up but with a combination of poor market timing and misjudging the demand in the area, overpriced the property and couldn't sell it for over 9 months. Finally, the seller put in the MLS description that they would be open seller financing.
  Things I was able to negotiate:
  10% down, 4.5% interest rate, 7 year balloon
  Things the seller was able to negotiate:
  No inspection, I have to take the property as-is, sight unseen.
  Ability to take the property back if payments are 30+ days late.
  I had to pay lawyers fees to draw up the contract.
  Finding these deals is not too difficult. You can search on Zillow or Redfin for Owner Financing/Seller Financing, etc. You can also join Facebook groups for people offering properties on seller finance.
  
  Just curious, your comment "Ability to take the property back if payments are 30+ days late." caught me off guard. Usually a seller finance has to follow foreclosure laws for the state the property is located in, and Federal law mandates a 120-day waiting period before a lender can officially begin foreclosure, how did you get an attorney to write up an agreement for 30 days?
  0 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  9h
  Alex - the part that caught my attention is that the property sat for nine months before the seller finally offered financing. I've been seeing more situations where changing the terms might accomplish more than another price reduction.Did you end up paying close to the seller's original asking price in exchange for that 10% down and 4.5% rate, or did you negotiate the price down as well?
  And buying sight unseen without an inspection is quite a concession! How did you get comfortable with that risk?
  0 Reply
Dan Duenas
Lender · Member since 2026 · 36 posts · 20 votes
2w
It happens — and when it goes bad it's almost always the same story: a 3- or 5-year balloon with no exit plan lined up, and the bank says no when the balloon comes due.
The deals that work tend to share three things: the seller owns it free and clear (or close), the note is recorded properly with a real servicer collecting payments, and the buyer walks in already knowing their takeout — a DSCR refi, a sale, whatever — before the balloon date.
The deals that blow up: handshake terms, no servicing (he-said/she-said on what's been paid), insurance and taxes left to chance, or a balloon the buyer has no realistic way to pay. If a seller-financed deal can't appraise or can't qualify for bank financing, that's often WHY the seller is offering terms — price it and structure it with that in mind.
Happy to run the takeout numbers on any seller-financed deal you're looking at — especially if there's a balloon in it. — Dan
5 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  1w
  Dan,
  "The deals that work" structure that you laid out is the exact plan that we use when putting together an offers.
  The "HOW" you buy and "WHAT" happens at the end are the two most important aspects to figure out before you make an offer.
  0 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  5d
  Dan, the balloon risk is something I've been thinking about quite a bit lately while negotiating a mobile home park acquisition.
  It's easy to get excited about favorable seller terms today, but the real question is what happens when that balloon comes due, especially if financing conditions or property performance aren't where you expected.
  I'm curious, when you're evaluating a seller-financed deal with a balloon, how do you stress-test the exit? Do you have a particular cushion you like to see between projected refinance proceeds and the outstanding balance?
  I'd be interested in your approach, particularly for commercial or multifamily assets where NOI can change the valuation significantly.
  
  Lastly, do you lend on MHP's?
  
  Thanks!
  1 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  2d
  @Quetzaly Torres
  Have you done Market Research/Analysis of the area you are buying this property in?
  -What jobs are in the area? Are there new jobs coming in or leaving?
  -What's the population grow or contraction?
  -Building permits, is there a lot of construction going on or planned to be going on? How does that effect supply, will it oversupply the area?
  -What is crime rate?
  All this affects the next part on the evalution
  Picking a Market Cap Rate at the time of your balloon.
  -How much will the area grow/shrink by the balloon date?
  -Use multiple cap rates to stress test your underwriting, lower it until you break the numbers you are shooting for. At what point does your NOI not support your Cash on Cash/ROI you are expecting to get for this investment.
  -What's the cost of your loan? Hopefully it's not a variable rate.
  
  1 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  9h
  yes, we're looking closely at those market fundamentals, along with the property's current performance and potential upside.
  One thing on the balloon stress test - wouldn't we want to model higher exit cap rates rather than lower ones? That's where the valuation and potential refinance proceeds could take a real hit, especially if NOI doesn't grow as expected.
  Something else I've been exploring is negotiating a partial principal pay-down before the balloon rather than leaving the entire balance until maturity. Have you structured deals that way? I'm thinking it could provide some additional protection for both buyer and seller...
  0 Reply
Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
1w
They can work for buyers who can’t qualify for regular loans for some reason. I took one last year with the following terms.
25% down, $10k over asking, no inspection, no appraisal, 7% interest with a 5 year balloon. ($580k purchase with $150k down $2860/mo payment give or take.). Gave me money to pay the realtors and still have a cushion if they stopped paying and I had to foreclose. Used a professional servicer the buyer is paying for, included default interest rates.
It's a decent deal for me but it still doesn't excite me. To show you how even that isn't a screaming deal for me/the seller. Every "we buy notes company" that makes an offer wants to discount the balance 10-20%. A 7% interest rate with a 4 year term and a 75% LTV ratio isn't good enough to sell. Imagine if you got 10% down and charged 4%. They might offer you 70%? No thanks.
0 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  9h
  Bill, your point about note buyers wanting a 10–20% discount is something more sellers should probably understand before agreeing to carry financing...it makes me wonder how many sellers negotiate attractive terms upfront without considering what happens if they need their money sooner than expected.
  How do you structure seller-financed deals, particularly the down payment and balloon terms? do you generally structure them with the intention of holding the note to maturity?
  0 Reply
Ryan ThomsonBusiness Member
Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
1w
Seller financing does happen, and this scenario sounds like a textbook case where it makes sense.
A flipper sitting on a property for 9+ months with carrying costs piling up is motivated. That motivation is where the deal gets made. The key is figuring out what they actually need: full cash out, or just relief from the monthly payment?
If they own it free and clear (common with flippers who bought cash), you can offer a note directly. If they have a loan on it, you're looking at a wrap-around mortgage or a subject-to structure, which adds complexity and their lender's cooperation (or at least tolerance).
The numbers that usually make seller financing work on a stale listing:
- Seller accepts 5-6% on the note instead of parking cash somewhere else at 4%
- You get in with 10-15% down instead of 20-25% conventional
- Closing is faster and cheaper (no bank underwriting)
One thing worth checking before you get too far into negotiations: is there an existing FHA or VA loan on it? If the flipper bought with a conventional loan that's assumable, or if the previous homeowner's FHA/VA loan is still on title somehow, there may be another angle. I've seen creative deals fall apart because nobody checked what was actually on the property.
For a flip that sat 9 months, the seller's pain is your negotiating position. Come in with a clear offer structure, a down payment that covers their equity need, and a rate that beats what they'd earn elsewhere. That's usually enough to get the conversation going.
The Assumable Guy544 Reviews
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- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  9h
  @Ryan Thomson Ryan, I've been seeing more of this too. Sometimes the seller doesn't necessarily need another price reduction, they need a different way to get the property sold. Are you seeing sellers willing to carry a second behind the buyer's acquisition lender, or are most of the deals you're putting together full seller-finance arrangements on free-and-clear properties?
  I think that distinction can make a big difference in how many buyers can actually make the numbers work.
  I'm currently working on terms for MHP in north FL. It's a challenging one because there are multiple sellers, so getting them to agree is a 'fun' task.
  0 Reply
Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
1w
Dennis, the replies here highlight why I’d look at seller financing as both a financing strategy and a tax strategy. The balloon is probably the first thing I’d stress test. Before agreeing to a 3 or 5 year balloon, I’d want a realistic refinance or sale path based on what happens if rates stay high, the property doesn’t appreciate, or the buyer’s financial situation changes.
On the seller side, eligible gain from a qualifying installment sale can generally be recognized as payments are received, but it’s important not to assume that every component of the gain gets deferred. Depreciation recapture can have different treatment, and the interest received on the note is generally ordinary income. I’d also make sure the note is properly documented, the interest rate is appropriate, and principal and interest are clearly separated. If the deal is being structured because conventional financing isn’t available, I’d want to understand that reason before deciding whether the seller’s terms are actually attractive.
The best seller financed deals I’ve seen are the ones where the buyer has a credible exit and the seller understands exactly what they’re receiving and when. Happy to connect!
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1 Reply
- Dennis Bamford
  OP
  Investor · Indianapolis · Member since 2024 · 93 posts · 50 votes
  1w
  Excellent reply, I think you made a good point about "seller's term", we also have the buyer side terms that need attention also.
  I think we are going to be hearing alot more seller financed deal are getting done.
  0 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  9h
  @Ashish Acharya, how often does the tax side actually change the amount of cash a seller needs upfront?I hear installment-sale tax benefits mentioned quite a bit as a reason sellers should consider carrying financing - but if certain taxes are due in the year of sale anyway, that could change the down payment they'd be comfortable accepting.
  Should one be modeling the tax impact before negotiating seller-finance terms?
  0 Reply
Bobby MacikPro Member
Member since 2023 · 31 posts · 20 votes
6d
Hey there,
I am currently acting as the buyer closing on a custom land contract for a single-family home located in Portage County, Ohio.
To protect both parties and keep everything clean, we want to use an independent third-party servicing company to handle the contract's ongoing administration. Specifically, we are looking for a reliable, low-cost escrow, title, or dedicated loan servicing company that can:
1. Collect the monthly payments from me (the buyer).
2. Impound and pay the annual property taxes and hazard insurance.
3. Disburse the remaining principal and interest to the seller.
For those of you doing seller financing or land contracts in Northeast Ohio, who do you typically use for long-term note servicing? Are there local title companies or specialized servicing agencies you’d recommend that won't break the bank on setup and monthly fees?
Any advice or provider names would be greatly appreciated!
1 Reply
- Lauren Sanford
  Investor · Member since 2024 · 187 posts · 64 votes
  5d
  @Bobby Macik
  Madison Management Services . We have been buying and creating notes for 16 years and discuss this on our podcast. Servicing is great to help make it easier and follow the law but its still on you if they default. Make sure you used an rmlo and Underwriter the borrower!
  JKP
  1 Reply
- Bobby MacikPro Member
  Member since 2023 · 31 posts · 20 votes
  5d
  Thanks @Lauren Sanford . I'm the buyer/borrower. Do you service Land Contracts? its a 3-year contract, and both the seller and I want to find a loan servicing company to collect my monthly payment, pay my home insurance and taxes, and then distribute the remainder to the seller. We are looking for a company asap. Can you help? Thanks!
  0 Reply
- Lauren Sanford
  Investor · Member since 2024 · 187 posts · 64 votes
  5d
  Send us a pm or Google Madison Management Services
  0 Reply
John Leland
Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 137 posts · 43 votes
5d
Quote from @Dennis Bamford:
Hello,

Looking to hear from owner's that have done a seller financed deal or knows of someone that did and what was the outcome, good or bad?

That's about all we do along with we do Wraps. Yes they work but you need to set them up correctly. It's not fly by the seat of your pants type of investing. The contracts matter, disclosures matter, escrow matters, title matters, there is a lot of detail.
0 Reply
- Lauren Sanford
  Investor · Member since 2024 · 187 posts · 64 votes
  5d
  @John Leland
  As a note buyer and note investing podcast host around notes we see a lot of wraps. I would say 90% done wrong and 8-9% that are done correctly are never made with the idea of being able to be sold.
  0 Reply
- John Leland
  Specialist · I give advice - [email protected] - I focus on states where investing is profitable, reasonably safe & secure · Member since 2026 · 137 posts · 43 votes
  5d
  Quote from @Lauren Sanford:
  @John Leland
  As a note buyer and note investing podcast host around notes we see a lot of wraps. I would say 90% done wrong and 8-9% that are done correctly are never made with the idea of being able to be sold.
  That's likely correct. What we do is focus on profitability for the sake of our entry level investors and their goal is safe & secure income. Our more advanced investors are concentrating on appreciation along with tax write offs. Neither is versed in setting up notes for selling the note in the future. These are typically long term plays.
  0 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  9h
  @Lauren Sanford, if a seller thinks they might want to cash out that note down the road, what are the biggest mistakes you see that end up costing them money? I'm wondering how much of the discount comes down to the actual terms versus the way the note was documented and serviced.
  0 Reply
- Lauren Sanford
  Investor · Member since 2024 · 187 posts · 64 votes
  7h
  @Quetzaly Torres we discuss 14 factors on our podcast and we have a handy webpage that is interactive. Collateral, underwriting, interest rate, term, location, property type, value all come into play. Most discounts come from the rate and term however many other factors. I can share more of interested.
  0 Reply
- Quetzaly TorresPro Member
  Investor · Jacksonville, FL · Member since 2026 · 40 posts · 4 votes
  7h
  that'd be great - thanks! I'm particularly interested in situations where a seller carries a second behind the buyer's senior financing.
  If that seller eventually wants to cash out the note, how much does being in second position affect its marketability and discount compared with the interest rate and term? may be an important conversation to have before structuring the deal, rather than having the seller discover those limitations if/when they need liquidity.
  0 Reply

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